Tax Credits Fund New Products and Processes

June 7, 2013

Control Products Inc. (CPI) manufactures high endurance thermal and waterproof switches for the military and for the most demanding, quality oriented industrial manufacturers. The company is ISO9001 registered, which is the foundation for providing the best switching solutions. CPI is a leader in its field due to its ongoing research that results in innovative products for its customers and processes for their development and production. The company has approximately 50 employees.

CPI’s success is dependent on its commitment to research and development. The company wanted to obtain maximum benefits from the available tax credits for its increasing research activities. The relationship between CPI and NJMEP goes back to 1998. NJMEP has helped in closing an inactive drywell, with implementing a flow process and organizing its workplace by applying 5S concepts — Sort, Set In Order, Shine and Sustain — standardized procedures for maintaining an organized workplace using visual controls. With that kind of working history it made sense for CPI President Cliff Moodie to enlist NJMEP’s help in meeting his objective.

The preliminary information and the eligible R&D costs were reviewed by NJMEP. These costs, combined with information relating to gross revenue and other information allowed NJMEP to provide Mr. Moodie an approximation of the Federal R&D credits it would receive.

NJMEP prepared the technical support documentation for CPI’s filing of the R&D tax credit by writing technical project reports for the tax year. The objective of the reports is to demonstrate that the activities are indeed “R&D” within the meaning of the credit and its guidelines. The report highlighted not only the successful outcomes, but also the doubts, difficulties, unsuccessful experiments that marked the course of development efforts. NJMEP prepared the documentation for the three prior years. That was in 2007. Since then, NJMEP has continued to work with CPI in securing the company’s R&D tax credits.

Results:

In five years of filing R&D Tax credits CPI received over $300,000 in credits.

In the most recent survey conducted by NIST, CPI realized a cost saving of $45,000 and was able to invest $100,000 in new products and processes.

As a result of the thorough understanding of R&D Tax credits, CPI has expanded its investment in R&D by introducing Innovative Engineering, a methodology for developing new products and/or processes in the most efficient and cost effective manner possible thus improving its time to market and cost of development.

“Like many manufacturers, we regularly filed for the credits and had been happy with the results. Once we spoke with NJMEP, they provided us with a much greater understanding of the tax code. NJMEP, with a team of engineers, brought so much to the table that had been missing. Each year NJMEP returns to review the projects we are working on and prepares the documentation allowing us to apply for the current year credits. The staff is knowledgeable and the engineering reports document our activities. This makes it very easy for us to file our tax returns and be assured we will get the maximum credits for which we qualify.” Cliff Moodie, President, CPI

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New Jersey Manufacturing Extension Program, Inc. (NJMEP) is a not-for-profit company that works with New Jersey’s small to mid-sized manufacturers to help them become more efficient, profitable and globally competitive.